What would you do with an extra $200 a month? Many Americans don’t consider this amount a lot of money, and certainly wouldn’t view it as a stepping stone toward building wealth.

Real estate investors have a different mentality- they are grateful for this extra $200 a month because combined with their cash flow from other properties, it is their recipe for financial independence.

To think like a real estate investor, first you need to change your definition of wealth. It’s this simple- if you walk away from your job today and never touch a penny of your principle, how long could you live on your passive income?

There are many methods for generating passive income including rent houses, interest from bank accounts, and stock dividends. Out of these three primary sources of passive income real estate investing is the most secure and offers some of the highest rates of return. This is because with real estate investing you can leverage other peoples money, so that you don’t have to put down as much personal money as principle.

By purchasing a rental property that cash flows $200 a month, you will be closer to financial freedom than you have been your entire working career. Unlike the “allowance” you get from your job, which disappears if you quit or go on a year long vacation, this passive income will be there as long as you own the property- generating wealth without much effort by you. The more rent houses you have, the more passive income you generate- the longer you can live off your passive income. Eventually you will make enough passive income so that it meets and exceeds all of your bills and you will be financially independent.

While a 401(k) saves you money for retirement by taking chunks out of your paycheck your entire working career, it would only take the average American 15 rent houses to generate enough cash flow to retire on (which can be done in about 5 years!)

Does this sound too good to be true? Well it gets even better! Including cash flow, there are five ways real estate investing makes you money- equity capture, appreciation, tax advantage, and principle pay down.

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